42
TOBACCO BUSINESS
JULY/AUGUST 2013
NOTE: The highest combined state/local tax rate is $5.85 in New York
City, with Chicago, Illinois being second at $5.66 per pack. Other high
state/local rates include Evanston, Illinois at $5.48 and Anchorage, Alaska
at $4.206 per pack.
HigH Tax/Low Tax
The Top 10 Highest state Cigarette excise Taxes
(as of July 1, 2013)
that will make the display of cigarettes illegal
and will ban most legal promotional activity,”
according to the analysis, which stressed that
the city is once again targeting smokers and
licensed tobacco businesses.
There’s no doubt that harsh tobacco
regulation and taxation continues at the state
and local levels.But the good news is, it’s not all
bad.Asprinkling of positive news in the formof
legislative reversals and tobacco-industry-sided
fights are more commonplace now than they
were a few years ago.
Here is the lowdown (with a few highs) on
recent state and local regulatory issues.
CigareTTe Taxes
Since 2002, 47 states,Washington,D.C. and
several U.S. territories (Puerto Rico, Guam,
the Northern Marianas) have increased their
cigarette tax ratemore than105 times,according
to figures from the Campaign forTobacco-Free
Kids. Only three states have not increased their
cigarette tax since 1999 or earlier: California,
Missouri andNorthDakota.
Currently, 30 states and D.C. have cigarette
tax rates of $1.00 per pack or higher; 15 states
and D.C. have cigarette tax rates of $2.00 per
pack or higher; five states have cigarette tax rates
of $3.00 per pack or higher and one state (New
York) has a cigarette tax rate of more than $4.00
per pack ($4.35).
During 2013, 31 state legislatures have
reportedly either considered or continued to
debate bills to increase (or decrease) cigarette
and/or other tobacco product tax rates. The
one state that at press time already enacted
cigarette and tobacco tax increases isMinnesota.
The state’s cigarette excise tax has gone up by
$1.60 per pack, increasing from $1.23 to $2.83,
which went into effect July 1.The hike moved
Minnesota’s national rank for cigarette taxation
from28th to 6th.
Additionally in the state, the OTP tax rate
will increase to 95 percent of the wholesale
price, little cigars will be taxed as cigarettes, and
the existing fee on non-settlement cigarettes
will increase to 50 cents per pack, according to
industry reports.By January 1, 2014,most snuff
will be taxed at 95 percent or a minimum tax of
$2.83 per container,whichever is greater.
The absurdity of states like Minnesota
continuing to increase cigarette excise taxes in
these times was expressed by Professor Michael
Siegel of Boston University’s School of Public
Health. Commenting on a
New York Times
report that the French government reached an
agreement with cigarettemanufacturers to delay
a tax-led increase in cigarette prices from July
until October and cigarette volumes declined
nine percent year-over-year in the first quarter of
2013, Siegel said this “beautifully illustrates the
folly of funding essential government programs
using cigarette tax revenue,” which, he noted,
makes the government dependent on continued
high levels of cigarette consumption and
removes any incentive to substantially reduce
smoking.
More taxation irony was expressed in
Massachusetts, where lawmakers considered
a hike in the cigarette tax by $1 to $3.51 per
pack to help fix the state’s aging transportation
infrastructure, according to a report in the
Milford Daily News
. An economist with the
Massachusetts Taxpayers Foundation’s Center
for State Tax Policy said it is “expedient to raise
taxes on an unpopular group to raise revenue for
something everybody likes.That doesn’t make it
a good policy,but that’s the situation.”
Another economist at the Taxpayers
Foundation said if cigarette tax hikes reduce
consumption, “then that group of people will
continue to get smaller and smaller and smaller,
and, over time, you’re not going to be able to
extract revenue from that group.”
Meanwhile, there is true positive tax news
to report from one state. Kentucky legislation
taking effect onAugust 1will lower the chewing
tobacco tax from the current rate of 15 percent
of the wholesale price (roughly 41.25 cents per
New York
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$1
$2
$3
$4
$5
$4.35
$3.50
$3.40
$3.20
$3.025
$2.83
$2.70
$2.62
$2.52
$2.51
